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Looking for recommendations on managing an AR team.

I have been asked to change roles within my company to oversee the AR team. I have 13 years progressive experience in finance, but very little exposure to recievables. I have only ever worried about them on a macro level. Now I will be managing a team of 9, and making many micro level decisions and managing customer's accounts.

Does anyone have any reccomendations on resources, books, video, etc, that you think would be helpful with this transition?

Thank you in advance for all the help!

Answers

I don't have a specific resource, but I can share my experience. Depending on the AR customers your team will be responsible for you can make big inroads by looking at the pain the company is dealing with. You can only be successful with your AR team if you have the support of the rest of the company.

At a prior position, I determined that company policy was applied only as the sales people felt like doing so. So a bad client who took a lot of work to collect funds was kept, while a lower volume client was turned off without notice. The sales team also had a habit of approving 'one-time' exceptions to making payments or being turned off, on almost all clients all the time. The AR team knew they were already undercut before even trying to contact customers. By working with the sales and operations team, we developed and implemented something that treated everyone equally from the beginning of the process.Communication was key and the sales people were allowed a small amount of discretion to step in and give their account a real 'one time only' reprieve.

I also found that invoices were not getting sent as they were supposed to. Another hit to the AR team when they knew it was a great likelihood that someone would tell them they never received an invoice, and they had no way to verify. I worked with our IT department and we corrected this issue. The AR team dropped almost 50% of their collections accounts within three months with little more than gentle reminders.

If you have the above situations under control, then you are in a spot where you can actually manage your team. I worked with number of touches, followed by method of payment, and recurrence of late pays, as ways to track the success of my teams. This requires a lot of documentation. The documentation pays for itself, when it allows a team member to memorialize conversations and re-sent material, plus it strengthens the company's position when it comes time to terminate a customer contract.

I found that a successful AR team was a team that not only collected outstanding invoices, but also identified and created solutions to recurring issues. When they knew the rules and that they would be backed up by following policy, they were on board and energetic in trying to get funds collected and keep customers for the company.

I would start with a comprehensive review of your AR policies and sales terms. Are your policies and terms right for today's world. If so, are they being followed? Then look at your oldest AR items and repeat "terms violators". You may want to look at the value of certain "difficult" customers, are they worth it? You also want to get a good sense of how your AR team is spending their time. In today's world 9 seems like a really big AR team. Looking at taking credit cards and other forms of electronic payments may be worth pursuing.

Of course your greatest resources are the "stars" of your current AR team. Spend time in the weeds with them and check out the National Association of Credit Management (NACM).

Chris, I'll be happy to provide any advice I can - I currently work at Millward Brown and oversee everything AP, AR and other operational accounting, also managing a team of nine. I use a multitude of strategies when it comes to collections - although we may be in different industries (we are a marketing research company) it depends a lot on developing the relationships with the clients, getting evidence of approval of the purchase and proper documentation (Purchase orders, other) and also keying in the buyers (both at your company and the buyer who approved the initial purchase at the client) to develop your relationships.

Chris, As you get into the nuts and bolts of accounts receivable, you will also have to think about the exact processes your staff are using to track their communications with clients. If your company employs a CRM, make sure your staff are using it. If you do not have an electronic method of tracking communications, then develop a manual one. It is critical that every communication with a client about their account is documented in detail. Specifically, I would include, at a minimum, the following information on every call: date, time, name and title of the person spoken to and exact details of every conversation. Train your people to ask for a commitment for payment when they make phone calls. Those commitments may even come in the form of getting the client to agree to payment plans if they are having cash flow problems. Of course, if that is the case, then a review of the account will also be called for. Knowing who you spoke with in past conversations allows you to pin the organization down on their communications.

I also agree with what has been said above about working with your sales team. Having said that, it is quite normal for the individual who purchases goods or services to be a different person from the one who pays the bills. Find out if it is acceptable for your staff to contact the individuals who are responsible for ordering goods and services directly. I have found that sometimes that is a very helpful step in the process as those individuals are most likely to feel the pain once you decide to cut them off.

It is also imperative that you have executive backing for enforcement of policies on a consistent basis. Consistent application of policies is one of your most potent tools in the collections process, but you MUST know what your boundaries are up front. At some point in time, you will have to make a decision on whether to cut a client off or, if the client is too important to cut off, to bump the problem up to someone in your organization who has more influence with that client. If you have clear definition of that break point, your job will be much easier.

On a final note, you will also want to make sure you are sending out reminders/statements to your clients on a regular basis. Normally, this can be done via e-mail and in many cases, without a whole lot of work. This will then provide those clients who use the excuse that they "did not receive the invoice" with one less excuse about their lack of knowledge of the services or products they have received from your company.

Others have offered excellent suggestions. Here are a few more, based on 10 years leading the USA AR function for a global manufacturer.
1. Emphatically define "good" customer as one that meets its obligations, not just one that buys a lot from your company.
2. The order-to-cash process is a pipeline, with AR at the tail. Upstream defects and weaknesses can waste and multiply the efforts of your team. Enlist, if needed, the CFO or COO to help you address and eliminate these upstream challenges. You'll sometimes have to sell other managers on the benefits for them to make needed changes. It will improve profits, internal and external customer satisfaction and employee happiness.
3. Measure performance with a few critical KPIs. You can't manage effectively what you don't measure.
4. Pay special attention to delinquencies. This requires more than reminder mailings. Your team must talk to the client to set expectations, gain agreement and monitor results. Perhaps dedicate someone to address the more serious slow payers, record promises made and report results every two or four weeks. It's amazing what such focus efforts can produce. Alert/enlist help from sales, executive management and others as this is an issue of customer profitability for your firm. (See #1 above) Once an account goes over 60 days, probability of full collection starts to drop dramatically.
5. Make sure your lockbox bank(s) provide accurate and timely service, including reporting. If your team needs to manually apply a lot of cash, it's a big time waste.
6. In line with Ernie's last point, communicate your appreciation to your top performers. Work with the others to improve their skills via coaching, mentoring, education, training. Above all, stress the importance of listening as a key part of an effective communications and collection strategy.
7. You and your team should reach out, build relationships, and meet when possible, with customers, sales, order processing, invoicing, logisitics/fulfillment people, etc. It's easier if you create mutual understanding and work together. Train the sales team to engage early when a big or unusal order is pending. That way you can work together, set expectations, clarify what's needed to accomplish the desired result (or advise early if that's not likely to happen).
8. Avoid doing what you said "making many micro level decisions." There aren't enough hours in the day. Delegate, create or use standards for credit granting, write-offs, etc. Perhaps give any new customer an automatic credit line of, say, $1000. Deal with the exceptions, not the routine events.

Anonymous

(Agent, JKS Solutions, Inc.)
| Mar 6, 2013

I agree with all of the other posts. You can tell they were written by people in the trenches. I would add that you should take a collections law course to understand the laws behind collections. There are several good vendors out there that provide these courses.

Chris, I am going to take a different approach here...my assumption is that since you are an "Assistant Credit Manager", you are working for a professionally trained and experienced Credit Manager. This being the likely situation, you should be receiving detailed mentoring support for all of the specific duties, performance expectations etc. The operational responsibilities, measures, expectations and reporting are likewise assumed to be in place.

Your actual question is for "recommendations" to information resources.

So, for recommendtions addressing those theories, strategies and options underlying the policies, processes etc. now in place you have quite a few resources available.

Your business sector can make a big difference in where to look for best, most relevant sources.

If you like, feel free to contact me to discuss in depth and I will be better able to steer you to appropriate the resources.

Thank you, for everyone who has responded. While the responses were not what I originally was expecting, they have been extremely helpful. As I am getting my feet wet in the new role, I am realizing that Managing AR is as much, if not more, tribal knowledge rather than textbook knowledge.

I came into the role assuming there were some rough guidelines on how much and when to extend credit. That is really not the case, but instead it is more based on the history of a customer, their financial performance, and my general feel for them. The "feel" is the part that will just take some time to develop. I am an extremely analytically minded person, so the I am used to dealing in more objective situations. The subjective piece is challenging, but also rewarding.

My company is a manufacturer of residential ventilation products. We work with everyone from the handyman remodeling a bathroom or kitchen all the way up to mega big box retailers. I am fortunate to have a seasoned and extremely well respected mentor to help teach me the business. I just want to do my part to learn outside the office too, so that I am not too much of a burden on him. He has a great deal of changing responsibilities that he needs to manage, and learn too.

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